Japan’s Major Cities Post Land-Price Gains as Deals Rise

Residential buildings are seen in this elevated view of Nagoya City. Photographer: Shinobu Ikazaki/Bloomberg

Sept. 20 (Bloomberg) -- Land prices in Japan’s three
largest cities rose for the first time in five years, signaling
a property-market recovery in the world’s third-largest economy.

The average price of land in Tokyo, Osaka and Nagoya gained
0.1 percent as of July 1, compared with a 1 percent drop a year
earlier, the Ministry of Land, Infrastructure, Transport and
Tourism said in a report released yesterday. The gain was the
first since 2008 when it climbed 1.7 percent. The decline in
land prices, which have been falling for 22 years, narrowed to
1.9 percent, the slowest pace in five years.

Prime Minister Shinzo Abe’s pledge to end 15 years of
deflation and the Bank of Japan’s monetary easing policy, dubbed
Abenomics, have helped boost property sales in Japan. Real
estate deals in Japan will rise to as much as 4 trillion yen
($40 billion) this year, the most since 2008, according to Jones
Lang LaSalle Inc.

“Abenomics has lit up a fire in the real estate market,”
said Takeshi Akagi, a Tokyo-based director at Jones Lang
LaSalle. “This is only the beginning. We will see further
improvements next year.”

Commercial land values in Japan’s three biggest
metropolitan areas rose 0.6 percent in the year, reversing a
decline of 0.8 percent a year ago, the annual land survey report
showed. Residential land prices in the cities declined 0.1
percent in the year, narrowing from a 0.9 percent drop a year
earlier, according to the report.

Property Transactions

Nationwide prices for commercial land fell 2.1 percent,
while land prices for residential property dropped 1.8 percent,
it showed.

Abe has promised to loosen business regulations and
increase government support to help Japan’s industry as part of
the “third arrow” of a three-pronged strategy to stem
deflation, following fiscal and monetary stimulus.

Sales of offices, warehouses and retail space rose 85
percent to 2 trillion yen in the first half of 2013, heading for
the biggest increase in five years, according to Chicago-based
broker Jones Lang.

The most expensive piece of commercial property remained in
Tokyo’s Ginza shopping district, where land can cost as much as
20.4 million yen per square meter (10.76 square foot). The patch
of land posted a 3.6 percent gain from last year, according to
the report.

Tax Increase

Prices for commercial land in Tokyo’s metropolitan area
gained 0.6 percent, while residential land values fell 0.1
percent.

Property demand is also being fueled by last-minute buyers
before the expected increase in consumption taxes. Japan plans
to double the sales tax rate to 10 percent from 5 percent by
2015, with the first increase to 8 percent scheduled in April
next year.

Housing starts rose for the 11th month in July, the longest
rising streak since February 1994, land ministry data showed.
The number of apartments offered for sale in Tokyo and
surrounding areas gained 53 percent in August from a year
earlier, the biggest same-month increase since 1996, according
to the Real Estate Economic Research Institute.

Sold Out

Developers are also turning commercial sites into
apartments to meet rising demand. Mitsubishi Estate Co., Japan’s
biggest developer by market value, said on Sept. 17 that it sold
all 22 apartment units that cost as much as 542 million yen near
the Imperial Palace.

In Chiyoda ward, where Mitsubishi Estate’s apartment
building is located, residential land costs as much as 2.88
million yen per square meter, the most expensive in Japan, land
ministry data showed. The company had acquired the land that was
used as the headquarters of Tobishima Corp., a 130-year-old
construction company, in 2011.

“We have started to see signs of recovery,” said Keiji
Kimura, chairman of Mitsubishi Estate, in a statement. “In
order to end the asset deflation and achieve sustainable growth,
we must increase the competitiveness of our major cities and
stimulate housing investments.”